never letting a serious crisis go to waste. i'm not totally convinced by this line they have truly, they do care. if they didn't care then they would allow saudi arabia to build gigantic mosques to if they really cared it wouldn't have allowed the chechens to

send their students to go study wahhabism but that continues. on the tartar reaction to the shootdown, there really wasn't much of what other than the fear that it would be put back on them. it's important to note that are two different versions of tartar's. there's a tartar inrush and in the crimean tartar. >> different language are not related to each other. as far as i know. i'm talking only about the crimea partners. their only reaction was to be concerned to come back on them. and i'll stop there. >> thank you. >> okay, on the islamic state. i do think russia has a bill concern about potential for blowback both in central asia and the caucasus and within russia itself, but i also think

that their analysis of the problem is different. we talk about the islamic state as the problem and, we talk a lot about modern rebels in syria. the russian position generally has been there is no such thing as a moderate rebel. again after the john kerry meeting that may be beginning to change because it has been the formation of this rebel alliance with saudi help answer some questions about who the russians are going to be willing to engage. but you know, in general as kilic said, the targeting inside syrihas focused primer on non-isil forces which oppose the most direct threat to the assad government. so for the russians this hasn't been about places per se. and as far as the caucasus in

central asia goes, yes, there is a problem. there's a couple thousand russian citizens were fighting in syria. also several thousand central asians fighting in syria, many who traveled to russia first, migrant workers before then going to the middle east. and, of course, at some point we would think these people are going to go home. one of the striking things you hear from a lot of fairly well-placed sensible russians is it's a better that these people go to syria because then we can blow them up over there. i'm sure that's true to some extent but you cannot pull all of them up and you will not prevent all of them from coming home. moreover, the sources of radicalization in a lot of these places are internal. you have militant groups, opposition groups that are generated by the lack of

political, social and economic rights they face in these countries. uzbekistan has been fighting to oust the uzbek government, since the beginning of the 2000. pakistan, afghanistan where it still has fairly substantial numbers, recently pledging allegiance to isis. not because of anything going on in syria but it's because they see isis brand as important and it's a way of them to further their ambitions closer to home. it's not only a question of what's going on on the grid in syria, there's a much larger context of this. on energy, you know, in the eastern mediterranean i haven't been following closely recently so i don't know i have a lot to say except that from my power projection standpoint, the securing of russian naval

facility in turkey and syria is significant in that, one, you know, this is one of the key equities russia's going to insist on being any peace deal, the maintenance of the facility. but also over the course of the conflict that base has gone from being a small repair shed that didn't host anything or have any protection, to something that is pretty heavily armed now. some of the people in the defense department here are worried about the installation up at the access and aerial deny weaponry that would make a lot of at eastern better training let laurel i know go zone for nato, naval forces. so there is a geopolitical context here and out the enough about the energy to mention to say much except as kilic mentioned this is been a troubled project for a long time. with the decline in energy

prices could have gone to make sense economically anyway. that the economic is making lessons. talking to the energy people, this project was years behind schedule anyway, so the announcement about the cancellation was, maybe type substance to the future direction of relations between moscow and all corrupt. it provides a convenient cover for the fact that project was years been scheduled and probably was not going to be launched on time anyway. >> take two more questions. >> it is essential. at the same time it is new for posturing of a bit that we can still protect from the. it is a test but if you do it, deal with the tension,

et cetera, sanctions, we can achieve it. and internationally there is another part of the situation that we are fighting against isis but we kind of had a model here a couple years ago, maybe you adopt this model we can take the situation and fight against what, you know, all of these groups, including isis. so there is not much exploration but there is more rhetorical action and this rhetorical action is getting some political come and we need to -- internationally it has become very irrelevant. >> two related questions. you are right on the and the axis campaign the worst the navy but i think -- some not --

[inaudible] from russia's perspective, the turks brought down -- and they didn't have to try hard to do it. this is the price you pay. [inaudible] my first question is from the russian perspective do you think -- [inaudible] constitutes success, kilic choose a different angle, tell

the russian people if we have the sacrifice we can achieve this your achieve what? what is it, you know, what's the achievement? and if it isn't that, if it's a russia becomes part of the international community as part of the solution, isn't that what we want? >> thank you. [inaudible] [inaudible]

[inaudible] how does domestic policy played a role in this? >> do you think that the russians think they are punching above their weight, i think they are very aware of what their capabilities are and are not. and that means in certain areas that are perhaps punching above

their weight. in other areas they have very advanced capabilities. the brand-new caliber missile we've seen them using are really, really quite advanced and are very impressive piece of weaponry. as you rightly mentioned, a serious concern. that said there was just a long article in the "new york times" about how we are still flying b-52's from 1960s. they do know what their weaknesses into strengths are. they have just been to a large modernization program that perhaps jeff knows more about the 90. they have done some work on trying to make their force professional. they are still not entirely there. but generally any of the people they are sending to syria are on a contract. they are officially professional soldiers. they are moving in the direction of having a much more professional military.

so i can in some areas they certainly are. and others they are actually quite advanced. they have made really large strides since the georgia war, which was in a way that can't afford that exposed to them a lot of their weaknesses and they spent the next six years working on it. what are they trying to achieve? you know, i think we all would like to know that. i think there's another, only one goal, there's always going to be several different goals, and extent to which the achieve one or several of them is of course going to determine whether or not they will consider themselves successful. to my mind at the end of the day for major coal is the restoration of russia as a respected, by which i mean feared, international power, alongside the united states, china and whomever else, perhaps europe, perhaps the saudi scum

india. that to my mind is precise what russia wants, and everything else to be is just a matter of their getting there. i'm sure the others have different opinions. >> jeff? >> to your question, i mean, yes, this was an older plane but keep in mind the russians assumed they would be operating over territory where there was not come a threat to the plane. they didn't assume the rebels they were bombing had antiaircraft capabilities. when the plane was shot down for introduce the as/400. so they are taking the threat environment more seriously than they did. has had a mention on the military side they have a pretty significant reform of last couple of years. senior russian i was speaking with last week kind of pointed out semi-jokingly of all the things we said we were going

reform the only one that's ever had any result from the military. that's true. not only in terms of the professionalization of the forces but also in terms of developing the mature and osha complex, developing new radar missile and air platforms and naval platforms. so that is some of the stuff that's happening. russia is not a full spectrum force. it doesn't have the capabilities that the united states has budget has pretty significant capabilities compared to even a country like china. i think we have to take those seriously. i think sometimes of what was said at one time about the prussians, that they are an army with the state more than a state with an army. the question about whether russia's punching above their weight, welcome in the military domain probably yes, they are by keep in mind that the measures

of national power are measured in a number of other ways. oon the economic front, on the cultural front, the democratic front, rush is a much weaker and less potent force that it is. in terms of a russian strategy for syria, i heard the term from a russian analyst who looks at this usable and six i think that's a good way of describing what ultimately moscow is pursuing, which is to say they don't need to invite to control the entirety of the territory of the modern syrian state. or any post assad government. what they want is some sort of reliable regime, whether it's headed by assad or someone else, that controls the areas that are strategically important to them.

and that acts as kind of a client or partner, or as the very least, respective of russian interest and equity. if the forces control 70% of the country that is mostly uninhabited i don't think the russians necessarily think that is the worst outcome. >> so this goes against the russian emphasis on integrity and international relations which we have seen crimea and ukraine perhaps. >> russia is very committed to territorial integrity. [laughter] >> what, on the time status, probably give you -- thanks violations of their space -- so they supported the government action. as far as i know that the version was if you want to exact the public opinion, there is

action you did need to be short, decisive and it needs to end with a victory, right? this happens most when you have a country into a surgical strike. if you want to distract the public's attention probably do not shut down the russian jets. it would not bring any kind of victory and will influence the economy as well considering the economy and considering the social relations between two countries. it is not something that escalation of this crisis is not something that neither government nor turkish public wants at this point. >> well, i want to thank the panel. please join in that and thank you for coming today. i think this is a great panel. thanks. [applause] [inaudible conversations] >> the president will give an end of the year news conference this afternoon before leaving for hawaii. watch live at 1:50 p.m. eastern

on c-span3. >> this morning texas senator and republican presidential candidate ted cruz will address supporters at a rally in mechanicsville virginia. we will take you there live at 11:30 a.m. eastern on c-span3.

next we'll talk with jeanette greenwood to discuss her book about the migration of african-americans after the civil war. >> they were anti-slavery organizations in worchester, almost every town in the county had one. there were lots of citizens breakouts, quite a few freedmen aid societies organized by well as whites and blacks. it's a city that at this time is very forward-looking, very progressive and lots of ways. >> on american history tv we will visit mechanics hall built in 1857. the buildings was as the national register of historic places. it served as a learning center for its members but also serve as a platform for social and cultural activities including women's rights rallies. >> the first women's rights convention happened before the

hall opened, but afterward most people came here to speak. worcester was a central location and mechanics hall is where everything happened. if anything happened in worchester it happened here. >> finally, the clark universities special collectio collections. the father of modern rocketry. will talk with williams. >> robert goddard attributes his first interest in space travel and his first interest in a career in science to a day in 1899. he went outside with a saw and a hatchet, he was meant to trim the dead branches off a cherry tree. and he climbed the tree. i think he made himself a little ladder to get up the tree, and while he was up in the tree he looked down on the field around

him and he thought how wonderful it would be to build some kind of a device that could leave the earth and maybe even travel to mars. >> watch c-span city tour saturday at noon eastern on c-span2's booktv o and sunday afternoon at two on american history tv on c-span3. working with the cable affiliates and visiting cities across the country. >> federal reserve chair janet yellen official announced an increase in the key federally controlled interest rate wednesday. this is a first rate hike in nine years. she explained the logic and then took questions from reporters at a news conference in washington. this is just over one hour.

[inaudible conversations] >> good afternoon. earlier today, the federal open market committee decided to raise the target range for the federal funds rate by 1/4 percentage point, bringing it to 1/4 to 1/2%. this action marks the end of an extraordinary seven-year period during which the federal funds rate was held near zero to support the recovery of the economy from the worst financial crisis and recession since the great depression. it also recognizes the considerable progress that has been made toward restoring jobs, raising incomes, and easing the economic hardship of millions of americans. and it reflects the committee's confidence that the economy will continue to strengthen. the economic recovery has

clearly come a long way, although it is not yet complete. room for further improvement in the labor market remains, and inflation continues to run below our longer-run objective. but with the economy performing well and expected to continue to do so, the committee judged that a modest increase in the federal funds rate target is now appropriate, recognizing that even after this increase monetary policy remains accommodative. as i will explain, the process of normalizing interest rates is likely to proceed gradually, although future policy actions will obviously depend on how the economy evolves relative to our objectives of maximum employment and 2% inflation. since march, the committee has stated that it would raise the target range for the federal funds rate when it had seen

further improvement in the labor market and was reasonably confident that inflation would move back to its 2% objective over the medium term. in our judgment, these two criteria have now been satisfied. the labor market has clearly shown significant further improvement toward our objective of maximum employment. so far this year, a total of 2.3 million jobs have been added to the economy, and over the most recent three months, job gains have averaged an estimated 218,000 per month, similar to the average pace since the beginning of the year. the unemployment rate, at 5% in november, is down six tenths of a percentage point from the end of last year and is close to the median of fomc participants' estimates of its longer-run normal level.

a broader measure of unemployment that includes individuals who want and are available to work but have not actively searched recently and people who are working part time but would rather work full time also has shown solid improvement. that said, some cyclical weakness likely remains, the labor force participation rate is still below estimates of its demographic trend, involuntary part-time employment remains somewhat elevated, and wage growth has yet to show a sustained pickup. the improvement in employment conditions this year has occurred amid continued expansion in economic activity. u.s. real gross domestic product is estimated to have increased at an average pace of 2-1/4% over the first three quarters of the year. net exports have been restrained

by subdued foreign growth and the appreciation of the dollar, but this weakness has been offset by solid expansion of domestic spending. continued job gains and increases in real disposable income have supported household spending, and purchases of new motor vehicles have been particularly strong. residential investment has been rising at a faster pace than last year, although the level of new home building still remains low. and outside of the drilling and mining sector, where lower oil prices have led to substantial cuts in investment outlays, business investment has posted solid gains. the committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will continue to expand at a moderate pace and labor market indicators will continue to strengthen.

although developments abroad still pose risks to u.s. economic growth, these risks appear to have lessened since last summer. overall, the committee sees the risks to the outlook for both economic activity and the labor market as balanced. the anticipation of ongoing economic growth and additional improvement in labor market conditions is an important factor underpinning the committee's confidence that inflation will return to our 2% objective over the medium term. overall consumer price inflation, as measured by the price index for personal consumption expenditures, was only ®% over the 12 months ending in october. however, much of the shortfall from our 2% objective reflected the sharp declines in energy prices since the middle of last

year, and the effects of these declines should dissipate over time. the appreciation of the dollar has also weighed on inflation by holding down import prices. as these transitory influences fade, and as the labor market strengthens further, the committee expects inflation to rise to 2% over the medium term. the committee's confidence in the inflation outlook rests importantly on its judgment that longer-run inflation expectations remain well anchored. in this regard, although some survey measures of longer-run inflation expectations have edged down, overall they've been reasonably stable. market-based measures of inflation compensation remain near historically low levels, although the declines in these measures over the past year and a half may reflect changes in risk and liquidity premiums

rather than an outright decline in inflation expectations. our statement emphasizes that, in considering future policy decisions, we will carefully monitor actual and expected progress toward our inflation goal. this general assessment of the outlook is reflected in the individual economic projections submitted for this meeting by fomc participants. as always, each participant's projections are conditioned on his or her own view of appropriate monetary policy. participants' projections for real gdp growth are little changed from the projections made in conjunction with the september fomc meeting. the median projection for real gdp growth is 2.1% for this year and rises to 2.4% in 2016,

somewhat above the median estimate of the longer-run normal growth rate. thereafter, the median growth projection declines toward its longer-run rate. the median projection for the unemployment rate in the fourth quarter of this year stands at 5%, close to the median estimate of the longer-run normal unemployment rate. committee participants generally see the unemployment rate declining a little further next year and then leveling out. the path of the median unemployment rate is slightly lower than in september, and while the median longer-run normal unemployment rate has not changed, some participants edged down their estimates. finally, fomc participants project inflation to be very low this year, largely reflecting lower prices for energy and non-energy imports.

as the transitory factors holding down inflation abate and labor market conditions continue to strengthen, the median inflation projection rises from just 0.4% this year to 1.6% next year and reaches 1.9% in 2017 and 2% in 2018. the path of the median inflation projections is little changed from september. with inflation currently still low, why is the committee raising the federal funds rate target? as i have already noted, much of the recent softness in inflation is due to transitory factors that we expect to abate over time, and diminishing slack in labor and product markets should put upward pressure on inflation as well. in addition, we recognize that

it takes time for monetary policy actions to affect future economic outcomes. were the fomc to delay the start of policy normalization for too long, we would likely end up having to tighten policy relatively abruptly at some point to keep the economy from overheating and inflation from significantly overshooting our objective. such an abrupt tightening could increase the risk of pushing the economy into recession. as i have often noted, the importance of our initial increase in the target range for the federal funds rate should not be overstated. even after today's increase, the stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2% inflation. as we indicated in our

statement, the committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate. the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. this expectation is consistent with the view that the neutral nominal federal funds rate, defined as the value of the federal funds rate that would be neither expansionary nor contractionary if the economy were operating near potential, is currently low by historical standards and is likely to rise only gradually over time. one indication that the neutral funds rate is unusually low is that u.s. economic growth has been only moderate in recent years despite the very low level of the federal funds rate and the federal reserve's very large

holdings of longer term securities. had the neutral rate been running closer to its longer-run level, these policy actions would have been expected to foster a much more rapid economic expansion. the marked decline in the neutral federal funds rate may be partially attributable to a range of persistent economic headwinds that have weighed on aggregate demand. following the financial crisis, these headwinds included tighter underwriting standards and limited access to credit for some borrowers, deleveraging by many households to reduce debt burdens, contractionary fiscal policy, weak growth abroad coupled with a significant appreciation of the dollar, slower productivity and labor force growth, and elevated uncertainty about the economic

outlook. although the restraint imposed by many of these factors has declined noticeably over the past few years, some of these effects have remained significant. as these effects abate, the neutral federal funds rate should gradually move higher over time. this view is implicitly reflected in participants' projections of appropriate monetary policy. the median projection for the federal funds rate rises gradually to nearly 1-1/2% in late 2016 and 2-1/2% in late 2017. as the factors restraining economic growth continue to fade over time, the median rate rises to 3-1/4% by the end of 2018, close to its longer-run normal level. compared with the projections

made in september, a number of participants lowered somewhat their paths for the federal funds rate, although changes to the median path are fairly minor. i'd like to underscore that the forecasts of the appropriate path of the federal funds rate, as usual, are conditional on participants' individual projections of the most likely outcomes for economic growth, employment and inflation, and other factors. however, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data. stronger growth or a more rapid increase in inflation than we currently anticipate would suggest that the neutral federal funds rate was rising more quickly than expected, making it appropriate to raise the federal funds rate more quickly as well; conversely, if the economy were

to disappoint, the federal funds rate would likely rise more slowly. the committee will continue its policy of reinvesting proceeds from maturing treasury securities and principal payments from agency debt and mortgage-backed securities. as highlighted in our policy statement, we anticipate continuing this policy until normalization of the level of the federal funds rate is well under way. maintaining our sizable holdings of longer term securities should help maintain accommodative financial conditions and should reduce the risk that the federal funds rate might return to the effective lower bound in the event of future adverse shocks. finally, in conjunction with our policy statement, we also released an implementation note that provides details on the

tools that we are using to raise the federal funds rate into the new target range. specifically, the board of governors raised the interest rate paid on required and excess reserves to 1/2%, and the fomc authorized overnight reverse repurchase operations at an offering rate of 1/4%. both of these changes will be effective tomorrow. to ensure sufficient monetary control at the onset of the normalization process, we have for the time being suspended the aggregate cap on overnight reverse repurchase transactions that has been in place during the testing phase of this facility. recall that the committee intends to phase out this facility when it is no longer needed to help control the federal funds rate. the board of governors also

approved a 1/4 percentage point increase in the discount rate for primary credit to 1%. based on the extensive testing of our policy tools in recent years, the committee is confident that the normalization process will proceed smoothly. nonetheless, as part of prudent contingency planning, we will be monitoring financial market developments closely in the coming days, and are prepared to make adjustments to our tools if that proves necessary to maintain appropriate control over money market rates. thank you. i will be happy to take your questions. >> marty crutsinger with "the associated press." i guess the word is finally. and we've asked you for so long

why were you delaying? why were you delaying a? so i'll ask given developments around the world that they're still weakness and the inflation is still nowhere near your target. what made you say do it now? some have said it was because you feared a lack of credibility if he didn't move. did that play a role in your decision? >> we decided to move at this time because we feel the conditions that we set out for a move, namely further improvement in the labor market and reasonable confidence that inflation would move back up to 2% over the medium term, we felt that these conditions have been satisfied. we have been concerned as you know about the risks of the global economy.

and those risks persist, but the u.s. economy has shown considerable strength. domestic spending that accounts for 85% of our biggest bank in the u.s. economy has continued to hold up. it's growing at a solid pace. and while there is a drag from net exports, from relatively weak growth abroad, and the appreciation of the dollar, over all, we decided today that the risks to the outlook for the labor market and the economy are balanced. and we recognize that monetary policy operates with lags. we would like to be able to move in a prudent, and as we have emphasized, gradual manner. it's been a long time since the federal reserve has raised interest rates, and i think it's prudent to be able to watch what

the impact is on financial conditions and spending in the economy and moving in a timely fashion enables us to do this. again, i think it's important not to overblow the significance of this first move. it's only 25 basis points. monetary policy remains accommodative. we have indicated we will be watching what happens very carefully in the economy in terms of our actual and forecast our projected conditions relative to our employment and inflation goals and will adjust policy over time as seems appropriate to achieve those goals. our expectation as i've indicated is about policy adjustments will be gradual over time, but, of course, they will be informed by the outlook,

which in turn will evolve with incoming data. >> madam chair, thank you. steve leishman, seeking b.c. under the old regime before you raising rates it was easy to understand within your mandate what you wanted to be. you wanted the unemployment rate to fall, you want to inflation to rise and it was easy for the public to judge for success or failure after policy. could you explain under the new regime which are looking for a? do you want the unemployment rate to stop falling? do you wanted to rise? and what is it you hope for from inflation, which i think is a little more understandable, or is neutral in itself now a policy goal? >> neutral is not a policy goal. it is an assessment. it's a benchmark that i think is useful for assessing the stance of policy. neutral is essentially a stance of policy, a level of short-term

rates, which is the economy were operating near its potential, and we are reasonably, not quite that bad, but reasonably close to it, it would be a level that would maintain or sustain those conditions. so if this point, policy, we judge to be accommodated. the committee forecasts that the unemployment rate will continue to decline. and i think that's important and appropriate for two reasons. first of all, as i've indicated, i continue to judge that there remains slack in the economy, margins of slack that are not reflected in the standard unemployment rate. and in particular, i pointed to the depressed level of labor force participation and also the somewhat abnormally high level of part-time employment. so for the decline in the unemployment rate and

strengthening of labor market conditions will help to erode those margins of slack but also we want to see inflation move back to our 2% objective over the medium term, and so seeing above trend growth and continuing tightness, greater tightness in the labor and product markets, i think that will help us achieve our objectives as well as with respect to inflation. >> just a follow-up, how does raising rates help teach you to either of those goals? >> we have kept rates at an extremely low level and had a high balance sheet for a very long time. we have considered the risks to the outlook and worried about the fact that with interest rates at zero, we have less scope to respond to negative

shocks than two positive shocks that would call for a tightening of policy. that is a factor that has induced us to hold rates at zero for this long. but we recognize that policy is accommodative, and if we did not begin to slightly reduce the amount of accommodation, the odds are good that the economy would end up overshooting both our employment and inflation objectives. what we would like to avoid is a situation where we have waited so long that we are forced to tighten policy abruptly, which risks of boarding what i would like to see as a very long running and sustainable expansion. so to keep the economy moving

along the growth path it's on with improving and solid conditions in labor markets, we would like to avoid a situation where we have left so much accommodation in place for so long that we overshoot these objectives and then have to tighten up roughly and risk damaging, damaging that performance. >> chair yellen, jon hilsenrath from "the wall street journal." in this and then your statement about gradual increases and that section, the committee says that it will carefully monitor progress, actual and expected progress on inflation. that's going to read like some kind of code to a lot of people on wall street. can you describe, what do you mean when you say carefully monitor? and specifically with regard to what you do next, do you need to see inflation actually rise at

this point in order to raise interest rates again? >> we recognize that inflation is well below our 2% goal. the entire committee is committed to achieving our 2% inflation objective over the medium term. just as we want to make sure that inflation doesn't persist at levels above our 2% objective, the committee is equally committed -- this is asymmetrical -- and the committee is equally committed to not only inflation to persist below our 2% objective. now, i've tried to explain, and many of my colleagues have as well, why we have reasonable confidence that inflation will move up over time, and the committee declared it had reasonable confidence. nevertheless, that is a

forecast. and we really need to monitor over time actual inflation performance to make sure that it is conforming, it is evolving in the manner that we expect. so it doesn't mean that we need to see inflation reached 2% before moving again, but we have expectations for how inflation will behave. and were we to find that the underlying theory is not bearing out, that it is not behaving in a manner that we expect and that it doesn't look like the shortfall is transitory and disappearing with tighter labor markets, that would certainly give us pause. and we've indicated that we are reasonably close, not quite there, reasonably close to achieving a maximum employment objective, but we have a significant shortfall on inflation. and so we are calling attention to the importance of verifying

that things if all in line with our forecast. >> just to follow up, do you need to see it rise? not necessarily get it to the 2% goal, but in order to move again do you want to see inflation measures actually moving higher? >> i'm not going to give you a simple formula for what we need to see on the inflation front in order to raise rates again. will also be looking at the path of employment as well as the path for inflation. but if incoming data were, let us to call into question the inflation forecast that we have set out, and that could be a variety of different kinds of evidence, that would certainly give the committee pause. i don't want to say there's a single benchmark. the committee expects inflation over the next year, the median expectation is for inflation to be running about 1.6%, and both

core and headline. so we do expect it to be moving up, but we don't expect it to reach 2%. >> madam chair, craig tories from bloomberg. i'd like to follow john's question. the way the committee describes inflation, well, there's this transitory language. i'd like to point out that oil prices today are at 36, ed on june 15 they were $60. so this transitory which first appeared in the statement in the summer i believe is lasting and long, long time, maybe longer than many peoples definition of transitory and could go on. and second, i would wonder if the committee knows how quickly wage increases or labor market tightness transfers into higher

prices and that, too, is also a forecast. so my question, what would you be willing to do if you don't see progress toward 2% inflation of? we missed the target for three years and, you know, what would you be willing to do? and second, would you allow inflation to bounce around between two and 3% the way you've allowed it to move under 2% over the past several years? thanks. >> first, let me say with respect to oil prices, i have been surprised by the further downward movement in oil prices, but we do not need to see oil prices rebound to higher levels in order for the impact on inflation to wash out. so all they need to do is stabilized. i believe there is some limit below which oil prices are unlikely to rise. if we look -- to fall.

if we look at market expectations, market expectations are for stabilization and then some gradual upward movement. so i certainly grant we've had a series of shocks pushing them down, but we are not looking for them to revert back to higher levels that they were at, merely to stabilize. i would point out you asked me when we tolerate overshoots, for a number of years between 2004 2004-2008 we had a series of increases in oil prices that for a series of years raised inflation above. again, we didn't have a 2% objective then, but raised at about 2% and we judge those increases to be transferred as well and look through them. we do monitor inflation expectations very carefully.

if we saw in a meaningful way that inflation expectations were either moving up in a way that made them seem unable or down, that would be of concern. we have called attention to some slight downward movement in survey measures. we are watching that. but i still judge that inflation expectations are reasonably well anchored. so yes, we have tolerated insulation shortfalls that we thought would disappear over the medium term just as we did overshoots of inflation that we also judge to be transitory. but we do need to monitor inflation very carefully, because if energy prices and the dollar were to stabilize import prices, our expectation is that both headline and core inflation would move up.

and if we failed to see that occurring in the manner that we expected, of course we need to take further action to reconsider the outlook and to put in place appropriate policy. >> what would that action look like? >> well, you know, if the economy were disappointing, we, our actions would not purely be based on inflation. we would also take employment into account. so i can give you a simple answer but we would pursue a more accommodative policy because we do certainly are committed to achieving 2% over the medium term. >> bill dudley has talked about the need for the fed to adjust policy based on the responsiveness of financial markets as you begin to increase rates. you didn't talk about that today. is it a point that you agree with? and if so what is it that you're looking for? how we judge whether financial markets are accepting and transmitting these changes?

>> the are a number of different channels to which monetary policy is transmitted to spend decisions, the behavior of longer-term, longer-term interest rates, short-term interest rates matter. the value of asset prices and exchange rates, also these are transmission channels. we wouldn't be focus on short-term financial volatility, but were their unanticipated changes in financial conditions that were persistent and we judged to affect the outlook. we would of course have to take those into account. so we will watch financial developments, but what we're looking at here is the longer-term economic outlook, are we seeing persistent changes in financial market conditions that would have a bearing, a significant bearing, on the outlook that we would need to

take account in formulating appropriate policy. yes, we would, but it's not short-term volatility and mark market. >> the part where you didn't see changes, you would be concerned and have to move more quickly. are you concerned that if markets don't tighten its officially you may need to do more? >> well look, you know, this is not an unanticipated policy move. we have been trying to explain what our policy strategy is. so it's not as though i'm expecting to see marked immediate reaction in financial markets, expectations about fed policy have been built into the structure of financial market prices. but we obviously will track carefully the behavior of both short and long-term interest rates, the dollar, and asset prices, an if they moving

persistent in significant ways that are out of line with the expectations we have, then, of course, we will take those into account. >> think you, rebecca jarvis, abc news. historically most economic expansions fade after this long. how confident are you that our economy will slip back into the recession in the near term? >> so let me start by saying that i feel confident about the fundamentals driving the u.s. economy, the health of u.s. households and domestic spending. there are pressures on some sectors of the economy particularly manufacturing and the energy sector reflecting global developments and developments in commodity markets and energy markets, but the underlying health of the u.s. economy, i consider to be

quite sound. i think it's a myth that expansions die of old age. i do not think that they die of old age. so the fact that this has been quite a long expansion doesn't lead me to believe that it's one that has, at its days are numbered. but the economy does get hit by shocks, and they were both positive shocks and negative shocks. and so there is a significant on, you know, probability in any year that the economy will suffer some shock that we don't know about that will put you into recession. and so i'm not sure exactly how high that probability is in any year but maybe at least on the order of 10%. so yes, there is some probability that that could happen and, of course, we would

appropriately respond, but it isn't something that is fated to happen because we've had a long expansion and i don't see anything in the underlying strength of the economy that would lead me to be concerned about that,. >> in the event of an outcome like that, in the most negative of scenarios, are there other policy measures outside of interest rates, outside of traditional quantitative easing, that you inside that have discussed and contemplated for another environment like something which we saw throughout the great recession? had a talk about anything that would be more direct to the economy? >> during the years in which we were, you know, the economy was recovering from the great recession and with it for the policy and measures in place, we studied our policy options quite carefully. as you know, communications policy to affect market expectations about the path of

interest rates played an important role, that's something we did in conjunction with asset purchases. obviously we lowered our overnight interest rate effectively to zero, now we have seen some foreign central banks, europe, the ecb, and others that have taken their overnight rate into negative territory, and that's something that i don't contemplate that we wanted to do this, it is something that we could study, of course, we have balance sheet policies and there may be a range of direct policy that we could use as well. but this is something that we have thought about our ranges of options. ..